By charging too high a price and selling too large a quantity JVC reduced profits by the amount of the red shaded area shown to the right. Had it known of Sony's plans it would not have advertised the higher price and would have earned higher profits. It is now faced with the unpleasant choice of rapidly dropping price (at great expense in advertising) or accepting the losses.

   This then is the fundamental problem facing an oligopolist. Individual competitors can shift its demand and marginal revenue curves without warning. An even deeper problem, as we shall see, is that firms can benefit from coordinating activity (in many cases illegal) but can also benefit from misleading one another.

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